GE sees efficiency driving mining spend

The mining industry’s renewed focus on improving productivity is overtaking growth as the main driver for capital spending, but the sector still offers “great opportunity", according to Geoff Knox, the head of GE’s new global mining business.

Mr Knox said the commitment of mining companies around the world to lift efficiency and lower their cost base had changed capital spending patterns but that the boom was far from over as far as GE was concerned. “Our customers are looking for more productive solutions and more efficient solutions as they get their productivity to world-class levels and as they get their cost bases down," Mr Knox said.

“We have great opportunities to help our customers in this phase of productivity and efficiency."

GE will set up a new global headquarters for its growing mining business next year in Brisbane, headed by Mr Knox. The business has been strengthened by the $700 million acquisition this month of underground mining equipment manufacturer
Industrea
.

Industrea will add about $400 million of annual revenues for GE’s mining business, which is targeting a more than doubling in annual sales to $5 billion from about $2 billion in four to five years.

The acquisition comes four months after GE took over US-based Fairchild International, a manufacturer of underground mining vehicles, and is part of the group’s strategy of expanding its reach into the underground mining supply sector.

Mr Knox said GE would be on the lookout for more acquisitions that offered value. “It’s a good time to look at acquisitions because the price cycles have come down, but what we buy has to be in our market reach."

Mr Knox said he saw 2012 as the peak of capital spending by mining companies, but that 2013 would remain relatively high.

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“The expected capital spend in 2013 is still well above where it was in 2010 on the upside of the boom," he said. “If you are well positioned with your customers with good products there’s still opportunity there but you also need to be ready for the fact that there is going to be a greater focus on productivity and efficiency over capital over the next period of time."

He voiced confidence in continued growth in China although acknowledged it would go through “cycles."

“We still think the spend will be solid and we like having a good footprint in China."

South America also offers opportunity because of the continuing robust pricing and “reasonable" demand for copper, while the iron ore price is stabilising again, opening up project opportunities.

On the east coast of Australia, the closure of high cost coal mines was part of a “natural cycle," Mr Knox said. “Those that don’t have an ability to get down low on the cost curve are naturally closed. You have to be in that lower quartile of cost. If you’re not it’s hard to compete."